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Free-Trade Trucking

The Bush administration decided to implement the trucking provisions of the North American Free Trade Agreement in February after a NAFTA arbitration panel ruled the United States must open its borders to Mexican trucks or face possible trade sanctions.

In 1993, the United States, Mexico and Canada signed the North American Free Trade Agreement. The United States and Canada had signed a trade pact in the 1980s, but NAFTA represented a “regional” agreement that would eliminate all tariffs and other trade barriers between the three countries. Some of these barriers were dropped immediately; other provisions have been phased in over time.

Cross-border trucking between the United States and Mexico was one of the provisions phased in. Beginning in 1995, each country’s trucks were allowed to travel only within limited trade zones along the border. NAFTA called for full access beginning in January 2000, but the Clinton administration, citing safety concerns, refused to allow Mexican trucks beyond the border trade zones.

Mexico filed a protest with a special NAFTA panel which issued a final ruling Feb. 6 saying that while the United States could require Mexican trucks to meet its safety standards, it had to allow Mexican truckers access to U.S. roadways. On Feb. 22, the Bush administration said it would begin work immediately to comply with the panel’s ruling. President Bush also promised additional safety inspectors to help ensure those trucks that cross the border meet U.S. safety standards.

Despite President Bush’s decision to move ahead on opening the country’s southern border, don’t expect to see a flood of Mexican trucks rolling over American highways anytime soon. The decision only means that the two governments will continue to work out the procedures for cross-border trucking. According to industry insiders, that means agreeing to the rules that Mexican carriers must follow when applying for authority to operate in the states.

The trucking industry believes Mexican carriers should comply with the same regulations and meet the same requirements as U.S. carriers to obtain U.S. operating authority – especially safety and insurance standards. But the rules and regulations are only a “part of the puzzle.” U.S. and Mexico trade negotiators will also need to address infrastructure and other issues.

“The issues are really in the details,” of the agreement says Martin Rojas, director of cross border operations for the American Trucking Associations. Whatever the final details, however, Rojas says he doesn’t expect to see a flood of Mexican truckers rolling across the nation’s highways.

“Perhaps this is going to be more of an evolutionary thing rather than a revolutionary change here,” Rojas says. “It is going to take a while to work out the whole way we operate under a more open border. You are not going to see a rush of Mexican trucks coming into the United States, and you are not going to see a rush of U.S. trucks going into Mexico.”

There are Mexican carriers waiting to apply for authority, but that number is fairly low, according the Department of Transportation’s surface, maritime and facilitation division. Division Chief David DeCarme told the Associated Press that 8,500 Mexican trucking companies now operate within the United States.

Those truckers operate only within special 20-mile border zones. DeCarme says that the DOT has applications from another 190 Mexican companies for U.S. operating authority.

“When you are looking at workload and you’re looking at inspection work force, this is not a case where we think that new Mexican carriers are going to be overwhelmingly at the border,” DeCarme says.
While the trucking industry and most U.S. businesses support the NAFTA agreement, some safety, environmental, labor and owner-operator groups oppose opening the border and decried the Bush administration’s actions.

“We’ve always been against opening the border,” says Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association. “We don’t believe that U.S. interests are appropriately equipped to adequately monitor or enforce safety. The responsibility of enforcement will be largely on the United States, and the United States isn’t capable of monitoring the insurance of the trucks that come across the border, and it can’t monitor immigration laws either.”

Spencer cites the safety enforcement issues as his members’ key concern, but there are economic issues as well. OOIDA is also concerned about cabotage – point-to-point movement within a foreign country. NAFTA, as well as the free trade agreement signed between the United States and Canada in 1989, calls for free movement of trucks involved in international trade between the countries.

Canadian truckers have been allowed into the United States since the late 1980s, but these trucks are restricted to delivering a load from a point in one country to a point in another country. For instance, a Canadian trucker can deliver a load from Montreal to New York and then pickup a load in Boston and deliver it to Toronto. But that trucker may not carry a load from New York to Boston, unless the load’s ultimate destination is Toronto.

Likewise, the same rules would apply to Mexican truckers who move goods from Mexico to the United States. But Spencer believes Mexican truckers will stay in the United States once they cross with an international load and then compete with U.S. truckers for domestic loads. “Once Mexican trucks start entering the U.S., there will be little incentive to go back south,” he says. “They’ll simply be absorbed into the U.S. transportation industry. They will simply stay in the United States to the economic detriment of U.S. truckers” since Mexican truckers will work for less pay than U.S. truckers will.

The International Brotherhood of Teamsters also opposes an open border on safety and economic grounds. Its argument is that the majority of Mexican trucks are unsafe since they do not have to meet the same safety standards as U.S. trucks. The Teamsters union also opposes NAFTA on the same grounds as others who opposed the “globalization” of trade. The Teamsters union argues that unfettered free trade will drive down wages in the states and send domestic jobs to Mexico where wages are much lower.

Teamster members rallied in El Paso, Texas, Feb. 16 to protest opening the border. According to the union, only about 1 percent of the 5 million Mexican trucks that crossed into the 20-mile border zone last year were inspected by U.S officials. Environmentalists also stated their opposition during the rally, citing concerns about hazardous cargoes and increased emissions from Mexican trucks that are not required to meet the same emissions standards as U.S. trucks.

In a press release following the rally, Tyson Johnson, a Teamster international vice president, said the trade agreement pitted lower-paid Mexican truckers against better-paid American workers. “Mexican truck drivers are not our enemies,” Johnson said. “Flawed trade agreements that pit worker against worker are the real enemy.”

Most industry observers dispute the Teamsters claims. According to ATA’s Rojas, the U.S. industry supports NAFTA overall, but the industry also wants Mexican truckers to meet U.S. safety standards, and it wants sufficient inspectors at the borders and other programs in place to protect safety.

On this side of the border, the administration and Congress are taking steps to address the safety issue. The Bush administration said it would add more inspectors and other resources designed to ensure safety. Besides hiring more inspectors, U.S. officials will also likely have to build additional inspection facilities, improve paperwork flow and create a database that tracks the safety records of Mexican carriers. Training Mexican commercial vehicle inspectors is also a pressing need.

Rep. William O. Lipinski, D-Ill., introduced a bill in the House that would require all trucks that pass from Mexico to the United States to pass the same safety inspections. Titled the Foreign Truck Safety Act, Lipinski’s bill would require safety inspections on Mexican trucks. According to figures from the DOT, about 35 percent of Mexican trucks inspected by U.S. authorities were put out of service for safety violations. But fewer than 2 percent of the 5 million trucks that crossed the U.S.-Mexican border last year were inspected, according to Lipinski.

The NAFTA arbitration panel ruling did allow that each country has the right to establish safety standards for trucks operating on its highways, and most observers expect that to be the case. In earlier interviews, officials with the Federal Motor Carrier Safety Administration said Mexican officials were making progress in developing a carrier database and implementing safety rules necessary for cross-border operations.

The FMCSA will have the responsibility of implementing NAFTA’s cross-border truck and bus provisions. According to an FMCSA report, the agency will ensure that all foreign motor carriers operating in the states comply with all U.S. safety regulations. FMCSA says it will also increase its inspection personnel at the border.

Texas state lawmakers are asking the federal government for more funding for more inspection facilities and roadway construction and maintenance to handle truck traffic that is expected to increase dramatically over the next few years.

OOIDA’s Spencer argues that the Mexican trucking industry never wanted an open trucking policy to begin with. “They wanted Mexican truckers to stay on their side of the border and U.S. trucks to stay on their side of the border.” According to Spencer, global economic interests pressured trade negotiators to include the trucking provisions in the agreement, “because they saw a chance to lower cost.”

Despite that contention, trade between the three NAFTA countries has boomed since the agreement was signed in 1993. Since that time, Mexico has become the second largest export market for U.S. goods just behind Japan. Imports into the United States from Mexico have also soared, turning what had been a modest trade surplus between the United States and Mexico into a fairly significant trade deficit – some $23 billion in 2000. The key for trucking is that the bulk of that trade moves via truck. In Texas, for instance, state officials expect heavy truck traffic to increase by 85 percent over the next 30 years as a result of NAFTA.

Already, the movement of goods via truck between the United States and Mexico has soared by more than 275 percent since the agreement was signed in 1993. According to figures from the DOT’s Bureau of Transportation Statistics, the dollar amount of total U.S.-Mexico trade by truck increased from $38.5 billion in 1993 to $143 billion in 1999. Of that total in 1999, 53 percent of that trade was from Mexico into the United States while 47 percent was from the states into Mexico. Eighty-four percent of surface merchandise trade between the United States and Mexico traveled by truck. Truck trade between the United States and Canada also increased during that same time.

As trade increases between the three NAFTA countries, truck freight will also increase. Efficiency demands that the old way of moving freight across the border – in which it takes three tractors to handle one trailer traveling from Mexico to the United States – give way to something new.

In the end, trade is an extension of foreign policy. The first foreign leader President Bush met with early in his term was Mexico’s president, Vicente Fox. Trade and NAFTA were key topics during their discussions. Both leaders vowed to move forward with NAFTA and saw the agreement as positive for both sides. President Bush campaigned as a free trader, and his administration is expected to strongly support NAFTA.

The federal government has not always taken that approach to trade. Trade with everyone was George Washington’s vision of trade policy, and free trade remains a cornerstone of the American creed. In the nation’s early years, trade policy involved tariffs and protectionist laws designed to protect the country’s developing manufacturing base from foreign competition. In 1930, as the economy reeled from the Great Depression, Congress passed the Smoot-Hawley Act, a protectionist tariff bill that spread the depression to Europe and made the global economic situation worse.

In 1934, Congress got out of the trade business and gave the president authority to negotiate trade agreements with other countries, subject to congressional approval. U.S. presidents have inked a number of trade deals, including several rounds of the General Agreement on Tariffs and Trades. The United States signed the free trade agreement with Canada in 1989, and NAFTA followed in 1993.

Still, many opposed free trade. Ross Perot made free trade an issue during his presidential campaigns, by claiming that NAFTA would “suck” jobs to Mexico and drive up trade deficits. Most economists, on the other hand, believe the positives have far outweighed the negatives.

Of course, the full impact of the NAFTA agreement on the economy in general, and on trucking in particular, won’t be known for several more years. But trade will continue to expand, and trucking firms on both sides of the border will learn how to work with an open border.

“A lot of companies on both sides have established long-term relationships,” ATA’s Rojas says. “They’ve had these relationships for a number of years. From these relationships, various operational opportunities will develop to meet the growth in trade volumes we’ve seen and the growth in cross-border trucking we’ve seen.”